New Tax Guidance for Meals Offered to Employees

Many businesses routinely offer meals to employees as an incentive. However, upcoming changes to tax regulations will affect how such meals are treated for deduction purposes and organizations should be aware that new guidance will take effect beginning in 2026.

2026 Employer Meal Deduction Changes

Beginning January 1, 2026, businesses will no longer be able to deduct expenses for employer-operated eating facilities, meals provided on the employer’s premises or for meals provided for the convenience of the employer. This rule applies to all businesses, regardless of their fiscal year. Businesses should identify which meal-related expenses will be affected and consult their tax professional to plan for any financial impact.

What can businesses continue to deduct in 2025?

Occasional meals provided to employees may be excluded if their value is minimal and if accounting for them would be unreasonable or administratively impractical.  Examples of qualifying meals include:

• Occasional refreshments such as coffee, doughnuts, or soft drinks
• Meals or meal allowances for overtime if they are not given routinely or based on hours worked
• Employee events, such as occasional parties or picnic

Recordkeeping Guidance

Other business meals may still be eligible for a 50% deduction if there is a business purpose for the meal and the cost is documented.

Businesses are advised to document all deductible meals. The following details should be included for each record:

• Date of the meal
• Total cost, including tax and tip
• Name of the restaurant
• Description of the business purpose (attendees and relevance to the business)

Food and drink purchased at entertainment events must be purchased separately or clearly itemized, as entertainment costs are not deductible.

If you have any questions, please reach out to your Keiter Opportunity Advisor or call 804.747.0000

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